DCA

Howzit, Eddie!

Thank you. To you, too.

Yes, Tim’s advice is a basic tenet of trading successfully: buy as low as possible, and sell as high as possible. This is more commonly known as ‘timing the market’ (buy low, sell high) and it is pretty much an impossible task. If it was easy, we’d all be millionaires wouldn’t we? I certainly don’t try to do it. Mistiming the market has been the ruin of many who’ve tried. There is a way round this, however. I’ll talk about it in a moment.

Another basic tenet of investing that I need to mention, especially if you’re looking to invest in crypto but also for traditional financial (TradFi) markets, is to never invest more money than you are willing to lose. Obey this rule, and you’ll always have food to put on the table. Disobey it, and it’s off to debtors prison for you.

Yet another rule is to do your own research (DYOR). Don’t simply mimic others’ investment strategies. Learn from them. Make your own decisions based on what you have learned. Stand on the shoulders of giants and know where you are.

So, my investing strategy is to first calculate how much money I am willing to lose. In other words, how much money could I spend which wouldn’t cripple me if I lost it. It can be a lump sum, or a regular amount. Once I’d got that number, I stuck to it.

Next, I studied the markets that I was interested in. I did my own research. I obeyed the DYOR rule. I was interested in TradFi S&P500, and Bitcoin (BTC). So, I began investing slowly in each at regular intervals. No matter what the price was that day, I would buy the same small amount. Sometimes the price was up, and sometimes the price was down. I bought regularly until my disposable income was disposed. Then, I just waited…and I have been waiting for nigh on three years! Doing the investing this way evens out the ups and the downs, and gives you a good average price. It’s called ‘Dollar Cost Averaging’ (DCA). I haven’t sold my BTC yet, but I made about 2x on my S&P500 investment when I sold it. That, basically, helped me pay off the house.

You spoke about graphs. Yes, graphs can help you discover what’s going on currently and link it to previous patterns - like the BTC price which is usually always a bit lower towards the end of the month. As such, some graphs may help you determine when might be a good time to buy or to sell, but graphs in and of themselves will never predict the future with certainty. They can’t. They’re like weather forecasts: more wrong than right.

I wish you well in your investing adventure. Note that I am not qualified to give any advice, financial or otherwise. I will, however, help you by passing on whatever knowledge or experience I have gleaned over the last few years so that you don’t end up reinventing the wheel or making the same horrid mistakes I made. Believe me, I made many very big expensive mistakes.

Give my love to Moira.

Regards, Philip